Current Economic Relations Between China and Latin America

“A Few Words of Gratitude” First of all I have the duty and the pleasure to give my deepest gratefulness to all the personnel and researchers with the IDE for all the help and support they have provided me during my stay in Japan and for the successful accomplishment of my research project. In addition, I feel very thankful for the opportunity to get to know this particular people and deepen my understanding of its culture. I would like to particularly thank my counterpart Kanako Yamaoka, whose help was essential for anything I have achieved. I also appreciate the valuable remarks on the Chinese economy from Ken Imai and the solidarity offered by Tatsufumi Yamagata. The author Eduardo Regalado Florido, MSc. is the deputy director of the Cuba’s Center for Studies on Asia and Oceania (CEAO). He majored in Education in the Specialty of Geography at the Pedagogical University Enrique José Varona in Havana, Cuba. He got a Mastership in International Economics at the Center for Research on International Economics, Havana University. He is currently a Senior Assistant Professor of Political Economics at the Havana’s University of Informatics Sciences (UCI) and specializes on the economics and politics of the People’s Republic of China at the CEAO. This paper is the result of his three months stay at the Institute of Developing Economies, Tokyo, Japan, from September 30, 2008 to December 29 2008 as a Visiting Research Fellow. List of Major Works - “Defending the Yuan”. 1998. Published by: Asia-Pacifico. Magazine of the Center for Studies on Asia and Oceania, Cuba. Special Issue. No.3. March 1999. ISSN – 1025-3068. (Co-author: PhD. Elda Molina) - “China and the World Trade Organization”. Proyección 2000. Magazine of the “Fundación Noreste”, Topolobampo y la Cuenca del Pacífico, A.C. México. No. 10, September 2000. (Co-author: PhD. Julio Díaz Vázquez) - “The Reform of the State Companies: A Decisive Stage for the Economic Restructuring”. Economía y Desarrollo. Magazine of the Havana University, Cuba No. 2 / 2001. ISSN 02552-8584. - “Central America: A Venue for the China-Taiwan Conflict”. Cuadernos de Nuestra －i－ América. Magazine of the Center for Studies on America, Cuba. Vol. XIII, No. 26 – Vol. XIV, No. 27, July 2000- June 2001. ISSN 0864-179 (Co-author: MsC. Alfredo González Pedraza) - “China and ASEAN at the Path of Integration in the XXI Century”. Magazine of the Institute for Studies on Africa and Asia. Tokyo, Japan. 2002. ISSN 0286-8369. (Co-author: MsC. Mónica Cortina Castellanos). - “The Financial Reform in China”. De la Economía Internacional (Digital Magazine of the International Economics Research Center of Havana University, Cuba. 2003. ISSBN 959-7164-54-x; Economía y Desarrollo. Magazine of the Havana University, Cuba. No. 2 / 2003. ISSN 02552-8584; México y el Asia Pacífico. Magazine of the Asia-Pacific University, Mexico. No. 2, May 04. (Co-author: PhD. Elda Molina) - China: Again Defending the Renminbi”. México y el Asia Pacífico. Magazine of the Asia-Pacific University. Mexico No. 2, May 04. (Co-author: PhD. Elda Molina) - “Integration in Asia-Pacific”. México y el Asia Pacífico. Magazine of the Asia-Pacific University. Mexico. No.3, March, 2005. http://www.nodulo.org/ec/2004/n027p11.htm. (Co-author: PhD. Elda Molina). －ii－ Contents Introduction ……………………………………………………………………………… 1 Chapter I. Economic Situation and International Insertion of China and Latin America since the 1980’s.………………………………………………… 4 1.1 The Chinese Economy after the Process of Reform and Opening. ………… 4 1.2 The Latin American Economy since the 1980’s.………………………… 4 Chapter II. Characterization of the Present Economic Relations between China and Latin America. ………………………………………………… 6 2.1 Evolution of the Economic Relations between China and Latin America from the 1980’s to 2000. ……………………………… 6 2.2 Results of the Relations’ Expansion atter 2004. ………………………………10 2.3 China’s Bilateral Relations with Some Latin American Countries. ……… 19 2.3.1 Argentina. ………………………………………………………… 19 2.3.2 Brazil. ……………………………………………………………… 22 2.3.3 Chile. ……………………………………………………………… 24 2.3.4 Mexico. …………………………………………………………… 26 2.3.5 Cuba. ……………………………………………………………… 28 Chapter III. Assessment and Prospects of the China －Latin America Economic Relations. ………………………………… 32 3.1 Challenges and Opportunities. …………………………………………… 32 3.2 Prospects. ………………………………………………………………… 35 Conclusion ……………………………………………………………………………… 37 References ……………………………………………………………………………… 39 －iii－－ iv－ Introduction Since the proclamation of the People’s Republic of China in 1949, neither this country nor Latin America comprised themselves among the priority areas for their foreign policies, mainly due to political, geographical and cultural reasons. In the second half of the 1950’s the “Cold War” policy enforced by the United States to isolate Communist countries, damaged the relationships of the Asian country with the rest of the world, while setting the guidelines for Latin America’s external policy. In Latin America, the United States imposed the “Truman Doctrine” (1947) and the “Rio Treaty” (1948) aimed at consolidating their political and economic prevalence in the continent and neutralizing the communist influence. In addition, military governments were abundant in the region in the 1950’s, and they were rather reluctant to set up relationships with China. Within this context, the Latin American countries accepted Taiwan’s as the legitimate government of China and failed to establish diplomatic relationships with the continental authorities. In the 1950-1958 lapse, the Chinese authorities made efforts to expand cultural and economic exchanges that could lead to the establishment of diplomatic relationships. However, in the commercial field the total amount of exchanges barely amounted to $30 million1. The first diplomatic relations in the region were established in the 1960’s after the Cuban revolution. This event prompted the beginning of a new phase (1960-1965) for the China-Latin America relationships, with bilateral trade reaching $31 million in 1960, over $343 million in 1965 and $1.3 billion in the 1960-1965 lapses2. This encouraging behavior slowed down significantly in the second half of the 1960’s for several causes. It was damaged by the China-USSR discrepancies, the sudden changes in Latin America’s political situation (military coups in several countries) and China’s “Cultural Revolution”. However, after Taiwan was removed and the People’s Republic of China reinstated in the United Nations, a total of 11 Latin American countries extended it their diplomatic acknowledgment in the 1970’s 3 . Thus, from 1970 to 1979 took place a process of normalization of the China-Latin America links, which had repercussions in the political and economic fields. More than 10 commercial agreements were signed with different countries in the region; the exchange of official commercial delegations exceeded 50 and foreign trade increased eight folds, from some $146 million in 1970 to over $261 million in 19794. The 1980’s were decisive both for China and Latin America. In China, due to the process of reform and opening that took place after 1979 and in Latin America owing to the 1 www.moftec.gov.cn 2 www.moftec.gov.cn 3 Chile (1970), Peru (1971), Mexico, Argentina, Guyana and Jamaica (1972), Trinidad & Tobago, Venezuela and Brazil (1974), Surinam (1976) and Barbados (1977). 4 www.moftec.gov.cn －1－ important changes that began taking shape both in the economic and political fields. A new stage started for the links between both parties in these years. Initially, they were not quite significant, with ups and downs until 2004, but registered an outstanding boom after this year. This work will be devoted to analyze this particular period. Research Problem: Precisely, the rising Chinese presence in Latin America has opened the way to a wide debate on the possible opportunities and risks derived. Several questions arise, but the purpose of this work is to answer one in particular: Are China’s relations with Latin America complementary or Chinese exports of manufactured goods to the region are threatening and undermining local producers, while imports from China condemn the region to an eternal role as exporter of raw materials? Hypothesis: My research departures from the hypothesis that, in the current conjuncture, there is a complementation in the relationship between both parties that allows them to enhance the potential for mutual development. For Latin America, the current presence of China in the continent is allowing an outstanding opportunity to start a path towards sustainable development, which in turn should influence the readjustment of the international economic relations in the region. For China, this relationship allows an expansion and improved balance in its international economic relations and mainly to secure the resources required for its development. Goals: The general goal of this research is to produce a balanced approach and estimate the prospects for the China-Latin America economic relations. In order to achieve this, I have defined the following specific goals: 1） To explain the specific economic needs of both China and Latin America, which determine the rapprochement of both parties. 2） To examine the economic complementation and the possible obstacles for the China-Latin America relations. 3） To determine the current condition of the economic and commercial relations between China and Latin America and to forecast the future scenario. 4） To analyze the possible restructuring of the economic relations

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